tv Nightly Business Report PBS March 20, 2014 6:30pm-7:01pm PDT
report" with tyler mathisen and susie gharib. brought to you in part by -- thestreet.com. featuring stephanie link who shares her investment strategies, stock picks and market insights with action alerts plus, the multimillion dollar portfolio she manages with jim cramer. you can learn more at thestreet.com/nbr. what a difference a day makes. the dow rises triple digits, e racial mo erasing losses on news about the economy. what happens next and what's the best place for your money? the yellen effect. when rates rise, and they will at some point, what does that mean for your investments, the housing market, your mortgage and for savings? just do it. and that's what nike did in its latest earnings report. what's behind the strong quarter at the world's largest athletic
clothingmaker. we have all that and more tonight on "nightly business report" forthursday, march 20th. good evening, everyone, and welcome. winter is over and spring has sprung. sort of. and for their part, stocks sprang as in sprang back from yesterday's losses. the chill that fed chief janet yellen put into stocks yesterday when she hinted that interest rates might rise sooner than expected next year was all but gone today. got a boost from better than expected economic data. the philadelphia fed reported a boost in business activity in its region this month. a private reading on leading economic indicators was higher in february. even though jobless claims rose by 5,000 last week, the increase was less than expected. so the dow was up by about 108 points. the nasdaq and s&p both added 11. but even though stocks ended higher today, the threat of rising interest rates is still worrying many investors. what does it mean for their stock portfolios and for their
fixed income holdings? dominic chu has more on what a hike in rates if it happens could mean for your investments. >> reporter: for many economists and investors, rising interest rates are a sign that markets are getting back to normal again. but if interest rates rise there are going to be benefits and drawback. for one thing higher rates means that bond prices go lower. be sure to keep an eye on that part of your portfolio. that leaves the other big asset class, stocks. >> what we're seeing is a lack of commitment on the part of many investors to the stock market, even though we are five years into this bull market. and what we'd advocate is for investors to recognize the importance of remaining invested despite short-term turbulence. >> reporter: so where are the attractive places to invest in the stock market? the places that actually benefit when rates are on the rise? >> i think the sector that's going to benefit most from a rising interest rate environment is definitely the financials. >> reporter: the thinking is
that traditional lenders like commercial banks can borrow at cheaper rates in short-term markets and then lend that money out at hire rates to customers. the wider that gap, the more profit for banks. then there's the technology stocks, some of which have compelling cases for investments. >> you look at cisco, intel, microsoft, these really old stocky technology stocks that haven't moved in years are now starting to pick up because people are saying well hey, i kind of get the best of both worlds here. they're companies with no debt, so they don't have to borrow if interest rates go up. i'm actually getting a really high yield if i'm looking at some of these over 3%. >> reporter: not everyone believes that we're destined to see a steady march higher for interest rates. economic concerns still linger. >> barely 1% inflation in the u.s., even lower in europe and falling. so it's really hard to make the case that the fed is going to be raising rates aggressively. >> reporter: that's why many financial advisers are telling their clients to spread their bets and build diversified
portfolios with exposure in all different kinds of asset classes. for "nightly business report," i'm dominic chu. joining us now to talk more about rising interest rates and what it could mean for your investment is brian jacobson. he's portfolio chief strategist at wells fargo fund management. brian, welcome. good to have you with us. >> thank you. >> did you think yesterday's comments by janet yellen were kind of pants on fire moment the way the markets did or was it an overreaction? >> i think that it was kind of an overreaction by the markets. this was her first press conference. some of her responses seemed mudded. i think she could do a better job in communicating with investors. that will come with time, though. it appeared the fed is being overly what we call hawkish, too concerned about perhaps inflation down the road and they might start hiking rates sooner than everybody else was expecting before going into the meeting. >> in a lot of the analysis today, brian, if you look at what she said if the economy
does improve, if the fed continues taper back on its stimulus in a gradual basis and interest rates go up slowly and steadily, is there any reason this should be traumatic for stock investors? >> absolutely not. and actually in fact, given that janet yellen effectively said that by the time the asset purchase winds up, which might be in the fourth quarter of this year, that it would take another six months at least before we would actually see the fed start raising rates. there were a lot of ifs and buts surrounding her forecast saying they might start hiking rates in about six months. it all depends upon the inflation outlook. the fed right now there's not much they can do to help support the labor market so they're shifting their attention more on inflation. that really doesn't look like there's a lot of pressure, building to drive that much above what their target is. >> can't slightly higher inflation be good for stocks, and can't slightly higher interest rates actually benefit some types of stocks, some
categories? >> that's correct. and actually slightly higher interest rates across the board could probably be beneficial for a lot of the stock market and even the fixed income market. all depends upon the parts. when interest rates rise, it's important to note they don't rise uniformly. that is, you don't see treasury bills rising at the same pace as you do a 30-year treasury or corporate debt. so we don't oftentimes see all the rates rise together. in fact, if you looked at how the market reacted to janet yellen's comments, the 30-year treasury, the yield on that actually dropped. so even though we saw 2-year treasuries go up in yield, 30-year treasuries went down, it could actually be pretty good for investors who are in some of the longer duration securities. >> so brian, if you want to make some changes in your portfolio, what areas should you go into? you heard dominic's package. he was talking about financials and also technology stocks. i know those are big areas. but do you agree with that and also what else would you add on the list? >> it all depends on the
context. i disagree with the financials. mainly in this environment banks are effectively borrowing for very low interest, effectively for free and lending at a higher rate. when interest rates do begin to rise, i don't think we're going to see those lending rates rise as quickly as the bank's borrowing rates. so it could actually result in a crimping of their profits. so from my perspective i would actually be shying away from some of the banks because i think their profits are going to be hit a little bit. information technology tends to be a very good area. you don't have very highly leveraged firms there. and oftentimes when rates rise it's because economic growth is picking up. and that's good for information technology stocks. >> very quickly on dividend-paying stocks, might they sort of lose some of their mojo if interest rates go up very quickly. >> they can. interest rates when those go up, dividend-paying stocks tend to act a little bit like bonds in that case where interest rates go up prices drop. that would be an area i would be underweighting, like utilities and telecomes whamplgts.
what do rising interest rates mean for buyers and sellers? sales are at their lowest level in 18 months. and today there was more troubling news. sales of existing homes edged lower in february, down .4%. diana olick has more on the outlook on this first day of spring. >> reporter: there were still several inches of snow on the ground as realtors toured a bethesda, maryland home this week. >> it will be nice when the flowers are in bloom. i think one of my buyers i'm working with is going to wait just to list their house because they've been working so hard on their landscaping. they'd like it to look pretty. >> reporter: while spring will bring flowers, it could also bring higher mortgage rates. >> a year from now, my guess is they'll be up 50 to over 100 basis points. >> reporter: rates bumped up slightly yesterday after the fed adjusted its outlook for interest rates overall this year.
>> once consumers recognize rates will not be falling but going up and the fed chairwoman has clearly indicated interest rates would be rising, i think people will be making their home-buying decision less on rates but on the credit accessibility, what they are comfortable with financially. >> reporter: affordability is weakening. home prices rose 9% in february from a year ago according to the realtors. largely due to a lack of supply. >> there's a lot of people that want houses but there's not a lot of houses to buy. so a lot of them are going very quickly. you get the escalation clauses. sometimes you get more than asking price. >> reporter: even though mortgage rates are historically low, getting that rate is tough. >> mortgage credit still very tight. so it's hard for that first-time home buyer to get in the market. >> reporter: the lack of younger buyers who rely on getting a mortgage are a big part of the reason the housing recovery, which was juiced last year by investors, has been slowing down now. home prices are rising faster than jobs and wages, and mortgage rates went from 3.5%
last year to 4.5% now. as the weather gets warmer, more listings will come onto the market. that's pretty certain. more listings will take the pressure off prices and unleash some of that pent-up demand. what is less certain, though, whether those who may want to buy a home will be able to afford a home. for "nightly business report," i'm diana olick in washington. >> now we've taken a look at what a hike in interest rates could mean to your investments and to the housing market. so after more than five years of a record low federal funds rate, what would a rise in rates mean for savers? hampton pearson takes a look. >> reporter: for long-suffering savers, the likelihood of rising interest rates more than a year from now won't make up for returns that have been less than the rate of inflation since the fed began its zero interest rate policy in 2008, leading economists say the yellen fed turn around won't happen overnight. >> chair yellen has made it very clear from the federal reserves
perspective it's going to take a very long time even after they begin raising interest rates to get them back to what anyone would consider normal, let alone what savers would consider normal in terms of a saving rate. >> reporter: for example, according to bankrate.com, about the best you can earn is a little less than 1% on a $25,000 money market or savings account. >> once they start to move higher, in all likelihood it's going to happen pretty slowly and over an extended period of time, provided that the economy continues to chug along. >> reporter: the best advice for savers, anticipating a higher rate environment in 2015, don't get locked into long-term fixed rate products in what could be a rapidly changing environment a year from now. for "nightly business report," i'm hampton pearson in washington. some discouraging data about the job market and long-term unemployed, a new princeton university study finds that only 11% of americans who have been jobless for more than six months
will ever retain steady full-time work. 3.8 million people, that's about 37% of all out of work americans, are considered to be among the long-term unemployed. now to the crisis in ukraine, be president obama announcing new sanctions against russia targeting specific russian officials and a russian bank. over that annexation of crimea. but the white house admits now the impact could actually hurt the global economy. >> this is not our preferred outcome. these sanctions would not only have a significant impact on the russian economy but could also be disruptive to the global economy. however, russia must know that further escalation will only isolate it further from the international community. >> well, eamon javers joins us now from washington with more. the president targeted among other russian officials russian cronies, he says, of mr. putin. who are they? >> reporter: that's right, tyler. first of all he targeted 16 russian officials but also four
people that the senior administration officials briefing reporters today called cronies of vladimir putin. these are some of the post-pews tin oligarcs who have risen to power underneath putin's rise in russia. the question is whether all of them have assets in the west that can be frozen by the sanctions. just before air time tonight we learned that one of them may have dodged some of the impact here. that's gnady temchenko, founder of a global commodities trading firm. it does about $93 billion in annual revenue. it is a huge outfit. he apparently sold all of his shares in gunvar just yesterday in anticipation of these sanctions. the gunvar group posted a statement to its web site tonight. it looks like there is a big financial chase going around the world as some of these oligarcs try to move assets ahead of what the u.s. is doing. >> another thing president obama said is this could impact the
russian economy. which sectors of the russian economy could be sanctioned if the u.s. goes forward on all that? >> reporter: important to point out in the sound bite what you just played what the president is talking about there is the possibility that the united states will take sanctions on specific sectors of the russian economy. they haven't done it yet but they have the authority as of today to do that. that could include things like minerals and mining, energy, financial services and the like. that's another sort of tool in the u.s. tool kit here that they could use if they want to scale up the sanctions, guys. >> when we slap russia they typically slap back. have they done that, if so how? >> reporter: they did that in mere minutes today, announcing sanctions of their own on u.s. officials. white house officials, members of the united states senate. that was largely laughed off here in washington. there aren't that many u.s. senators who have bank accounts in moscow. but still, the symbolism was there. the russians are trying to say hey, you're going to sanction our guys we're going to sanction your guys. that's how it works. >> eamon, thank you so much. eamon javers reporting from
washington. still ahead on "nightly business report," why coal? once shunned as dirty and expensive may be on the verge of a comeback. solid earnings from nike after the market close today. the sports apparel giant and one of the newest members of the dow jones industrial average posted earnings of 76 cents a share. that was 4 cents above analysts estimates. revenue also came in higher than expected, helped by rising sales in china and a big jump in europe. the company said global orders for its merchandise are soaring ahead of the world cup soccer championship in brazil this summer. shares rose initially after the report was released, and then in the regular session nike closed
at 79.27. it was up slightly. 30 of the nation's banks went under the federal reserves so-called stress test to see whether they'd survive another downturn. zion bank didn't reach the tier one capital environment. it says it well come up with a new plan to raise the necessary capital. hewlett-packard upped its dividend. the tech company's board approved a 10% hike and the increase is expected to start in may. separately at the company's annual shareholder meeting yesterday, ceo meg whitman hinted hp might enter the 3d printer market in june. shares of conagra foods maker of ketchup and healthy foods
surged. but its packaged foods company continued to struggle and sales just missed wall street estimates. still conagra shares were up 20%. a jump in home deliveries and selling prices, earnings jumped almost 35%, revenues surged 38%, but the home builder said it's still too early to predict the strength of this selling season. and arkansas court tosses out a $1.2 billion ruling against johnson & johnson. the lawsuit accused the drugmaker of improperly marketing its anti-psychotic drug risperdol and concealing its risks. the judge overturned the ruling saying the law didn't apply to pharmaceutical companies. shares were up a fraction to 94.12. symantec the maker of the norton anti-virus software fired its ceo. a board member was appointed
interim president and ceo. this is the second time the company has fired its top executive in less than two years. shares initially fell after hours, the stock ended the regular session up more than 1.5% to $20.91. and shares of walter energy fell sharply after the company announced it would sell a sizeable amount of debt. it was also down along with other coal stocks on a downgrade from bank of america merrill lynch. the firm lowered its price targets and earnings estimates on many coal sector players, saying falling marginal costs will depress prices. down to 27.07. despite the downgrade, demand for coal which still accounts for 40% of our domestic energy needs is on the rise both here and around the world. so what's driving the new boom in coal? scott cohn has the story. >> reporter: high season in coal country.
this energy's spring creek mine near the wyoming-montana border is going full tilt. for ceo collin marshall, these are the best of times. >> i'd say i'm optimistic by the way things are looking going forward. we're not there yet. we need process to go up to more sustainable level. but everything after two very tough years is going in the right direction. >> reporter: it's another effect of a brutal winter. for months utilities have needed all the fuel they can get. the price of natural gas is up by nearly a quarter which means for the first time in years coal is competitive. and with air conditioning season just around the corner, demand is only going higher. how much demand is there for this coal? this train is a mile long. each car holds 243,000 pounds of coal. they're loading them up and shipping them out 24 hours a day, seven days a week, 365 days a year. this coal is bound for detroit,
coated with a glue-like polymer to keep the dust down. there's plenty more where this came from. outside the mine, companies that rely on coal are feeling the ripple effect, like l and h industries in nearby gillette, wyoming, which make some of the big mining equipment. >> a lot of our customers are within 100 miles of us. so we're definitely seeing a resurgence. >> reporter: the coal business hasn't been like this in a long time, dealing instead with negative news like the massive coal spill in carolina in february, deadly mining accidents in west virginia, and the debate over climate change. >> the debate is settled. climate change is a fact. >> reporter: at this coal-fired power plant in gillette, considered state-of-the-art for environmental measures, they're worried proposed new carbon standards could put them out of business. >> so this facility would be obsolete. >> yeah. it's three years old. there's no technology out there currently available for the
market to remove co2 on a coal-fired power plant. >> reporter: but even some locals in coal country are concerned about the impact on the land and the groundwater. >> part of being a good neighbor of the coal mine is making sure the environmental impacts are addressed and using federal lands and a public coal resource is making sure the taxpayer gets a good return on the use of those resources. >> reporter: frustrating to coal state senator mike enzee who says the environmental issues are overblown, and the coal underappreciated. >> we're the saudi arabia of coal, and we're not putting any money into researching it. >> reporter: the coal companies are frustrated, too. their best hope for real growth, mining this coal and shipping it overseas. scott cohn, "nightly business report," decker, montana. if you want to read more about coal's comeback and the industry's changes economics, go to our web site, nbr.com. still ahead, can retailers
successfully turn cabin fever into spring fever? and what's at stake if they do? the messaging app tango has good reason to dance. china's ali baba group is making a big bet on tango. it's investing more than $200 million into the california-based mobile messaging service. tango not only allows its 200 million users to text each other but they can share music, photos and other content on their mobile devices. air b and b could be worth a bundle will. the online home rental service is in advance talks with private equity firms including tpg capital to raise funding that
could value the company at as much as $10 billion. on this first day of spring, many of the nation's retailers are counting on spring fever from shoppers. after a brutal winter that drastically cut sales and pummelled profits, retailers are hoping that pent-up consumer demand will keep their cash registers ringing. courtney reagan has more. >> reporter: it may be snowing in some parts of the country, but spring officially begins today. after the coldest winter in 13 years, cabin fever is at a high point for consumers. and retailers are positioning themselves to capture spring fever sales. even early hints of spring appear to be spurring some sales. georgia bank and sports scan imposed a pocket of spring weather, and nikes new nike free and roche run shoes led to nearly 4% dollar sales gain in running footwear last week.
fbr anderson says retailers begin to offer deeper spring promotions with gap leading the charge, offering 40% off compared to 30% this time last year. target and jc p krrkc penney ar marketing spring promotions from home goods to swim suits. tomorrow walmart is beginning its spring sales event, featuring what the world's largest retailer calls black friday-like prices on 60 outdoor goods. during the fourth quarter, weather closed 200 stores, but cfo charles holly says as the weather has improved so too have sales. >> pent-up demand ace huge factor this year. because of the fact it's been so cold and this polar vortex mass basic will i gripped the entire northeastern part of the country as well as the midwest, when the weather finally breaks it's going to unleash the animal spirits. i expect consumers are going to be out in force. >> reporter: home depot's annual spring black friday event kicks
off april 3rd spring could be essentially strong as consumers repair roofs, siding and other parts of their homes that were damaged by the severe winter. planalytics points out that's a double-edged sword. the more they're plowing into repairs the less they'll be able to spend on patio furniture and spring dresses. finally tonight, an unusual comment from a well-known billionaire about where he'd like his money to go if he passes away. google founder and ceo larry page told an economic conference that instead of giving his billions to charity or a philanthropic organization, he'd rather give it to elan musk, the founder of tesla and spacex and solar city. page says he wants to see his money go to someone with big ideas for changing the world. no comment from ilan musk. and many many wealthy people think this is actually a very good way to put their money to work after they're gone.
>> like winning the jackpot. i wonder what he's going to do with billions. that's "nightly business report" for tonight. i'm susie gharib. thanks for watching. >> and i'm tyler mathisen. thanks from me as well. have a great evening, everybody. we'll hope to see you back here tomorrow night. "nightly business report" has been brought to you in part by -- >> thestreet.com. founded by jim cramer, thestreet.com is an independent source for stock market analysis. cramer's action alerts plus is home to his multimillion dollar portfolio. you can learn more at thestreet.com/nbr.
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